BELLFLOWER : City Dispute Over Car Dealership Is Settled

The City Council has agreed to accept a $700,000 out-of-court settlement from the Ford Motor Credit Co. to recover money the city lost when a 1991 last-ditch investment effort failed to keep the Pete Ellis Ford car dealership in business.

Rather than go to civil trial, scheduled to have begun last week in Norwalk Superior Court, the council voted 3-2 to accept the settlement. One of the dissenters, Councilman Bill Pendleton, said he thought the city should have sought punitive damages before a jury.

In 1991, the council issued the troubled Ellis dealership a $400,000 interest-free loan and a $300,000 grant, both from the city’s federal Housing and Urban Development funds. Council members said at the time that saving the jobs of low- and moderate-income wage earners was an appropriate use of the federal funding. In addition, they were trying to save one of Bellflower’s largest producers of sales tax revenue--about $300,000 a year at its highest point--from going bankrupt.

After Pete Ellis closed the dealership abruptly in June, 1991, the city sued him and Ford Motor Credit Co., alleging that he had misrepresented his financial status and that Ford had reneged on its commitment to help Ellis stay in business. Mike Egan, deputy city administrator, said that the city’s litigation expenses have totaled about $400,000.

Ellis has filed for personal bankruptcy, said Richard L. Stone, an attorney for Ford Motor Credit Co. Stone also confirmed the settlement with Bellflower.

A new car dealership, Ford West, opened in 1992 on the Ellis site, and is expected to generate about $300,000 a year in sales-tax revenue, Egan said.